Iceland boss knew of collapse

SECRET documents show that Malcolm Walker, ousted chairman of Iceland, knew the business was suffering a drastic fall in sales - two months before he sold a £13.5m stake in the frozen food retailer.

Walker, 55, offloaded his shares in mid-December when City optimism about the company had lifted its price to 339p. A month later, Iceland admitted that it had been hit by a dramatic fall in sales in the final quarter of last year and the share price slumped.

Iceland later said that its profits, forecast to be more than £130m at the time of Walker's share sale, would be only £40m.

Walker insisted that at the time of his December share sale, he still believed Iceland would achieve its profits target. But an internal Iceland memo dated October and distributed under Walker's name admitted that sales, even at that stage, 'have fallen off a cliff'. He said that it had 'not been a good year'.

January's news that Iceland had suffered a sharp sales fall in late 2000 - just as Walker was selling his shares - caused uproar in the City. As the storm erupted, Walker was pictured in Financial Mail on Sunday relaxing with his wife Rhianydd in the Maldives. Walker rushed back to Britain and resigned.

At the end of May, Stephen Byers, then Trade Secretary, ordered an investigation into suspicions of insider dealing in Iceland shares.

Walker's secret memo, sent to Iceland executives on October 23, not only revealed worries about sales. It also said the company was under pressure to cut back on 'buy one, get one free' deals. These were boosting apparent sales. But Iceland's auditors said such deals had to be cut 'if we are to avoid disclosing the figure in our accounts'.

Contacted by Financial Mail, Walker said this weekend: 'I don't think there is any point getting into this conversation. I don't want to comment.'

Iceland said: 'We cannot comment on any internal documents. We are co-operating fully with any inquiries that may be going on.'